Donating Money from IRAs
(An excerpt from a Wall Street Journal article on October 25, 2008)
The federal government's bank-rescue plan extends
a way to give to charity. If you are at least 70 1/2 years old, you can donate as
much as $100,000 from your individual retirement account to charity tax-free. And
those distributions can count toward the required minimum distribution that IRA
holders who are 70 1/2 and older must take from their accounts every year.
The charitable-distribution provision was established by the Pension Protection
Act of 2006, expired Dec. 31, 2007, and then extended for this year and 2009 as
part of the bailout package signed into law this month.
The provision was extended "retroactively, as if it never expired," says
Ed Slott, an IRA consultant in Rockville Centre, N.Y.
The reader who wants to give his remaining required distribution to his church certainly
can do so. "Any school, college, church, United Way agency—any group with 501(c)3
status—counts," Ms. Choate says. Among the charities that don't count are
donor-advised funds and private foundations.
The reader also is right to assume that he can't donate IRA withdrawals al-ready
deposited in his bank account. Donations have to go directly from the IRA to the
charity. For example, if he has to take a required minimum distribution of $10,000
this year and already has withdrawn $5,000, he can transfer only the additional
$5,000 to his church.
If you are planning to give money to charity this year and you already have taken
your required IRA withdrawal, you may still want to consider your IRA as the source
of those funds, Mr. Slott says. That is because it's typically more to your
advantage to give away tax-deferred investments rather than those on which you already
have paid taxes.
One additional note: Even though charitable distributions
are allowed from IRAs, they aren't allowed from 401(k) accounts.